A January 2005 Conference Board report entitled Measuring More Than Efficiency: The New Role of Human Capital Metrics offers insights into a burgeoning practice in commercial human capital management that could have meaningful application in the public sector as well. According to the study, best practices human capital organizations are extending their use of people metrics beyond the traditional measures of efficiency (e.g. headcount and cost) to drivers of strategy (e.g. how human capital is involved in meeting strategic goals, improving communications, and demonstrating HR's contribution to overall organization performance). Although adoption of these kinds of measures is slow (only 12 percent of the 104 organizations surveyed are using these measures to a significant degree), best practices organizations are starting to use people metrics to understand the effectiveness and impact of people investments and HR activities in an effort to drive strategic business decisions.
Because this approach can be mission focused, not necessarily bottom-line focused, it is a commercial concept that has particular relevance to public sector HR leaders.

Drawbacks to Traditional Human Capital Measures
While the traditional human capital measures around headcount and cost, such as number of staff, total cost of staff, hiring and recruiting statistics, etc., have their place, their exclusive focus has inherent limits. Those kinds of measures tend to emphasize HR activities rather than the changes those activities generate. In our current results-oriented environment, simply demonstrating activities is not enough.
Furthermore, these kinds of measures further the view of HR as an administrative cost center, not a controller of critical processes that affect strategy. They foster the view of HR as transactional, not transformational.

Challenges to Implementing New Human Capital Measures
While only 12 percent of HR leaders interviewed for the Conference Board study indicated that their organizations currently are using these kinds human capital measures to a significant degree, 84 percent said they believe their organizations will be using them in the next three years. There are, however, barriers to speedy acceptance of this movement.

One is the persistent, and sometimes valid, view of HR as lacking in strategic integration in many organizations. Conference Board study participants pointed to the following limitations in their HR areas, which restrict their ability to implement these new metrics:

• lack of understanding of strategic key performance indicators
• inability to link people measures to those indicators
• incapability of identifying talent critical for implementing strategy
• inability to identify strategic talent pools.

Real Benefits
If the organization can get past the challenges, though, the benefits are real. The Conference Board study shows that when individual measures are correlated with perceived benefits, it is possible to link people measures to specific strategies. The study cites the following examples.



Organizations that have had some success in using people measures noted the greatest degree of success (defined as "considerable success" or better) in the following areas:

• improving employee communications
• reducing cost
• meeting strategic goals
• demonstrating HR's contribution to strategy.

Critical Success Factors
In order to be successful in using these kinds of human capital metrics, human capital leaders need:

• top management support
• appropriate IT processes/data collection processes in place
• measures that are easy to calculate, repeatable, and actionable
• organizational-particularly at the management level-understanding of the link between human capital activities and organizational success
• an understanding of the organization's key strategic objectives.